AI Drafter 
TaxTMI 
TaxTMI 
1958 (2) TMI 52
X X X X Extracts X X X X
X X X X Extracts X X X X
....the income of the year 1356 F. (as in the present case) under the Hyderabad Income-tax Act which came into force on 1st Azur, 1357 F. and whether such an assessment is illegal and is to be set aside. Learned advocate for the appellant states that he does not wish to press question No. 4 as it is concluded by our decision in Commissioner of Income-tax, Hyderabad v. Adilakshmi Devamma, AIR 1955 Hyd 225. In that case a similar question fell for determination, viz. "assuming that the Hyderabad Income-tax Act is intra vires whether the income of the previous year, that is to say. the income of 1356 F. could be validly taxed in 1357 F.?" Dealing with this question we had on the analogy of Section 3 of the Hyderabad Income-tax Act which is similar to Section 3 of the Indian Income-tax Act observed at page 227 as follows : -- "..... .This basis of assessing income was changed by the Indian Income-tax Act 1922 when tax in the language of Lord Porter delivering the judgments of the Judicial Committee in the Indian Iron and Steel Co. Ltd. v. Commr. of Income-tax, Bengal, 1943-11 ITR 328 at p. 336 : (AIR 1943 PC 124 at p. 128), "is assessed and paid in the next succeedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame person as A. S. Ahmed. A further letter written by the Income-tax Officer dated 27-6-1948 was also acknowledged by the said A. S. Ahmed, who also wrote the subsequent letters on the letter head of Haji Wali Mohamed Haji Moosa Saya. The notices which were issued to the assessee were by the Income-tax Officer, 4th circle, Hyderabad, as he was in charge of the area where the assessee firm was situated. Later, however, after reshuffling the jurisdiction of the assessee was given to the 1st Circle instead of the 4th Circle and consequently the Income-tax Officer of the 1st Circle issued another notice under Section 30 (2) of the Hyderabad Income-tax Act on 22-6-1951 which was served on 22-6-1951 on Nur Mahomed, Nur Mahomed wrote a letter on 26-7-1951 on the letter head of Haji Razack Haji Mahomed Saya and signed it as manager. In this letter the assessee stated that the account books were with the eldest brother Haji Yousuf, who lived at Aurangabad and therefore requested the Income-tax Officer to get in touch with the eldest brother at Aurangabad. The Income-tax Officer, however, by his letter dated 2-8-1951 required the association carrying on business at Nizamshabi Road to file a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he best interest of justice to drop the proceedings. The blank return form relating to the defunct firm of Haji Vali Mohamed Haji Moosa Saya is returned with full facts and explanations herewith." On the same date Messrs. Raja Rani and Co., Auditors addressed a letter to the Income-tax Office: explaining the various contentions in detail. The Income-tax Officer, therefore, had to make a choice either of accepting the contentions or making an assessment under Section 31(4) which latter course he followed on 22-9-1951 by making a best-judgment assessment on a total income of Rs. 6,10,500/- rejecting the several contentions of the assessee and making a demand of O. S. Rs. 2,70,807/- or I. G. Rs. 2,32,172/-. Haji Razack thereafter filed an application under Section 39 of the Hyderabad Income-tax Act in which he stated "though legally you can pick and choose any one of the old members, the proper course, in our opinion, should have been that you should issue notices to the party who was the senior member of the firm who had the control of the business and also of the books of account" and requested for the cancellation of the assessment under Section 39 and to take immediate steps....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said A. S. Ahmed acknowledged receipt of the notice purporting to be on behalf of Haji Wali Mahomed Haji Moosa Saya and asked for time; that subsequently similar notice under Section 30(2) was issued on 22-6-1951 and served on Noor Mahomed who acknowledged it on behalf of Haji Razack signing as its manager and on 13-8-1951 for the first time Haji Razack denied that he has anything to do with the defunct firm and requested time for enabling him to file a return. The question is whether these notices under Sections 30 (2) and 30 (4) were duly served on the assessee as required by law. This involves a further question whether after the firm was dissolved in the year of assessment, a notice served on any member of the firm Or his power of attorney agent can be Said to be duly served for the purposes of assessing the dissolved firm. The relevant provisions of the Hyderabad. Income-tax Act which require consideration are as follows: 30(2) "In the case of any person other than a company whose total income is, in the Income-tax Officer's opinion: of such an amount as to render such person liable to income-tax, the Income-tax Officer shall serve a notice upon him requiring him to fur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shall, if or opinion that such person is chargeable with tax, after obtaining the previous approval of the Deputy Commissioner, make the assessment to the best of his judgment and, in the case of a firm, may refuse to register it or may cancel its registration if it is already registered : Provided that the Registration of a firm shall not be cancelled until fourteen days have elapsed from the issue of a notice by the Income-tax Officer to the firm intimating his intention to cancel its registration. 35.(1) Where any business, profession or vocation is discontinued in any year, the Income Tax Officer may assess the income, profits or gains of such business, profession or vocation of the period between the end of the previous year and the date of such discontinuance at the rate in force in that year, in addition to the assessment if any, made on the basis of the income, profits and gains of the previous year. (2) Any person discontinuing business, profession or vocation in any year, shall give to the Income Tax Officer notice of such discontinuance within fifteen days thereof. (3) X X X (4) Where an assessment is to be made under Sub-section (1), the Income-tax Officer m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 35 of the Hyderabad Income-tax Act are analogous to subsection (1) and Sub-section (6) of Section 25 of the Indian Income-tax Act. Allowing for those provisions of Section 25 relating to the taxation of the period of transition under which tax is leviable under the Indian Income-tax Act of 1918 and 1922, the interpretation of the above referred provisions would be the same as that under Sub-sections (1) and (4) of Section 35 of the Hyderabad Income-tax Act. Further under Section 56, where any business, profession or vocation carried on by a firm or association of persons is discontinued, all the persons at the time of the dissolution. are jointly liable to assessment and also are liable for the amount of tax payable where the assessment has been made on the firm or association, but the tax has not been recovered from it. The section is not confined to the profits of only the year of discontinuance or dissolution but extends also to the profits of the preceding years, the principle being that when unit of assessment breaks up, the liability to tax should devolve on the component members. 7. Learned advocate for the assessee sought to contend that as there was a differ....